Inland Revenue Company inspection help please

laughing_cow

Hello

Hopefully there will be someone on here with enough knowledge to help with my query.

We have recently had an IR inspection to check our records. In the inspection they asked for details of freelance staff. Any freelance staff we occasionally use invoice us for their work and as such are self-employed and understand that their tax is their responsibility. However, it seems we have overlooked the cleaning lady who we just give a cheque or cash to each week (without an invoice). The IR began by asking for her NI details (obviously to check if she's paying tax) and then suggested that we should put her on the payroll, (which IMHO seems a bit over the top for someone who comes in once a week and earns £30 - but that's another story!).

She has cleaned for us now for two years. We know very little about her - embarrassingly we have just realised we don't even know where she lives - but in our experience she's always been very honest and reliable. I have her mobile no and phoned her to ask for her NI number, explaining that it had been requested by the Revenue. She has now decided that she's not going to work for us any more, and thus we don't "need" the NI number. My boss tried to call her yesterday and the mobile is now dead. It all seems a bit odd so I'm guessing that, at the very least, she's not been paying her tax.

Has anyone had any experience of anything similar? What will happen if I tell the IR that she has 'disappeared'? Will they think that we are trying to cover something up? And if they cannot trace her, are we liable for any of the tax, or could we get prosecuted for keeping incomplete records?

Thanks in advance for any advice received.

WHA

Most likely, they'll "gross up" the net wages by 22% basic rate tax (no NIC on wages level you mention), and send you a bill for the tax, with interest and penalties added. You could then try to get the tax back from your employee, but seeing as you know little about her, that's fairly unlikely. Luckily, the amounts involved are fairly small, so it won't break the bank.

paulus

Unless you can get her to retrospectively complete a form P46 certifying that this was her only or main employment, which seems unlikely, you'll probably have to pay up. An employer is responsivble for paying over the correct tax whether or not it was deducted from an employee. Any arguments that she could have been self employed (ie did she use her own equipment, work her own hours, paid by the job - not the time, use substitutes etc)?

sarahlouise210

The cleaner could have just panicked.. it may have been her only job. How did she get the job - did she apply or just walk in? Does anyone in the local area know where she lives..corner shop etc.Did they ask you how much per hour you were paying her-was she in once a week for a full day? was she receiving the minimum wage as this could also get you in bother. As you say £30 per week is not a lot of money, but if she had another job (plausible as she only worked for you one day a week) or was on benefits or had a state or company pension then tax may have needed to be deducted from the payments. It was your responsibility to ask her to complete a p46 in order that the tax office could decide if tax should be deducted on the £30.00. if she has "done a runner" you will probably be landed with the bill but as WHA says it will not break the bank. I think you wil have learned a valuable lesson and will get to know your new cleaner a little better - dont forget just because you put your new cleaner on the payroll does not mean that they will definately pay tax but it will fulfill your own obligation.

laughing_cow

Many thanks for the prompt responses. Good to hear that we hopefully won't be in too much trouble!

I think one of the crucial issues is whether she is classed as an employee or as someone who is self-employed, as paulus mentions. For info, the cleaner worked her own hours at the weekend, to a certain extent - she worked any hours she chose as long as the cleaning was done sometime between Friday 6pm and Monday 9.30am. We did supply most of her equipment (vacuum cleaner, mop), but she occasionally bought her preferred cleaning products which we reimbursed her for on production of receipts.

When we use freelancers they usually come into the office and use our computers, drink our coffee etc, and yet the IR seemed to be happy that these people invoice us and are not employees. What makes them different to the cleaner? And if it turns out that some of the freelancers have not paid the correct tax, could we be liable for them too?

If it turns out that we are also liable in some way for the freelancers, I'd appreciate suggestions as to how this could be avoided in the future.

Cheers.

laughing_cow

Thanks for your response sarahlouise210 - I was replying at the same time so missed it in my last response.

We used to use the services of cleaning companies but found that they were dreadful, and expensive. They used dirty water and often sent different people who had to be instructed every time which wasn't ideal! We found this lady because a few years ago I used to work at a large multinational company and she was one of the contract cleaners for a long time so I 'knew' her, to a certain extent, (although obviously now I realise I didn't know her that well!). That company has since merged with another and consequently the cleaning co lost the contract - ie she's not working there anymore. By coincidence I bumped into her in the street (big coincidence as we are in London), and at the time we were looking to get rid of our cleaning company, so she was pleased to be asked to work for us.

sarahlouise210, you asked about her hours. Her hours were fairly flexible as mentioned above and unsupervised - the general cleaning probably took about 2.5 hours and then she would do other occasional tasks (cleaning blinds, behind cupboards etc). We always paid her £30 but sometimes she might only do 2.5 hours, and other weeks she would perhaps do 4, depending on what needed to be done. She could always be trusted not to take the proverbial 'p', and the arrangement suited us both.

Writing this down, I realise it seems slightly ludicrous now that we have so little info about her, but she has been an excellent and totally reliable cleaner.

So, I'd say there's almost nil chance of finding her. If we have to pay just the tax owed, we'll be happy. Annoyingly, we now have to find another reliable cleaner or go back to the irritating cleaning companies. I'd rather use an individual though, usually more reliable so I'd be interested to know for the future how we can show that this person is not one of our 'employees'.

Cheers.

sarahlouise210

You will not be held responsible for the freelancers ... however it is the I.R. who decide if a person can be treated as self employed.As you acted in good faith and received invoices you should be ok.. but they should watch out! How do you know that they are submitting details of the invoices to the revenue ?? from your answer about her working hours..I suppose it depends on how much cleaning there is but I am imagining she is missing this nice little earner!

laughing_cow

sarahlouise210 wrote:

How do you know that they are submitting details of the invoices to the revenue ??

We don't. But then again, how could we know, eg that the company who supply our stationery and invoice us for it, are paying the correct taxes etc. Where does the responsibility for others misdemeanours stop as far as the IR are concerned? - Interesting!

sarahlouise210

I too was posting while you were doing the same. When I said how do you know they are submitting their invoices I was just making the point as far as you are concerned everything is above board with the freelancers. Regarding your cleaner.. well..:rolleyes: anyone living in London (and were also interested in moneysaving !) may consider £30.00 a good wage for a few hours and may feel the urge to send you a P.M.;) problem solved ! just remember to give them a P46 to fill in.. obtain address details and National Insurance Number!!

Debt_Free_Chick

laughing_cow wrote:

We don't. But then again, how could we know, eg that the company who supply our stationery and invoice us for it, are paying the correct taxes etc. Where does the responsibility for others misdemeanours stop as far as the IR are concerned? - Interesting!

That's a different situation. They are a supplier and you are probably not their only customer. Anyway, you pay them for a product not for "employment duties".

The issue with the cleaner cuts to the heart of the relationship you had with her. It seems difficult to see that she was anything but your employee. If she ran her own cleaning business and had a number of clients, supplied her own tools/equipment etc ... then she probably was self employed.

However, few cleaners work on that basis... if you think about it, you employed a cleaner in the same way as you employed a receptionist - it's just that the cleaner worked different hours. Even mum's who employ a nanny these days are more than likely treating them as employees and paying PAYE & NIC.

Even if she had several cleaning jobs, it wouldn't automatically make her self-employed ... she would just have more than one job and be treated as an employee in each.

Some guidance on this from the Inland Revenue here

Watch out for this in the future. Far better to have everyone who is undertaking work for you on an employed basis. (The contractors/freelancers are different, of course .... unless yours is the only contract they are working on!)

HTH

laughing_cow

Debt_Free_Chick wrote:

That's a different situation. They are a supplier and you are probably not their only customer. Anyway, you pay them for a product not for "employment duties".

Yes, you're right, I probably picked a bad example there. I should perhaps have shown examples of companies who provide us with a service rather than a product, such as temp agencies, designers, models etc.

Thanks for the IR information - very useful. Reading that, it seems that the cleaner should be classed as an employee. However, most of the criteria also apply to our freelancers so it doesn't make a lot of sense to me why the IR are happy that they are self-employed. Still, I'm not going to bring that up - I don't really want to encourage them to insist that the freelancers become employees!

The whole thing has surprised me I suppose because I have never heard of anyone having a cleaner on the payroll. As far as 'rights' go, what are the implications of putting a cleaner on the payroll? Could a cleaner eg take maternity leave? If this is the case then we have no option but to use a cleaning company or do it ourselves as we are a small business and paying benefits to such a 'minor' member of staff would be a struggle.

Thanks for all the responses - given me plenty to think about!